“Biological safety is part of the national security” – Introduction to China’s Draft Biological Safety Law (Part II)

This Legal Update follows up on our previous Legal Update "“Biological safety is part of the national security” – Introduction to China’s Draft Biological Safety Law (Part I)" and continues discussing other specific aspects of China’s Biological Safety Law (Draft for Second Reading) and their implications for companies operating in and outside China.

Specific Aspects

• Laboratory biosafety management
  
  The requirements for laboratory biosafety apply primarily to labs handling pathogenic microorganisms. Such requirements also apply to “production enterprises” involved in the handling of these microorganisms and the labs involved in the handling of biotoxins, plant pests and other biological factors.
  
  Pathogenic microorganisms and the labs handling them are classified under four classes respectively: Class III and Class IV pathogenic microorganisms are collectively called “highly pathogenic microorganisms”; and only Class III and Class IV labs can carry out, subject to approval, testing activities involving “highly pathogenic microorganisms” or suspected “highly pathogenic microorganisms”. 
  
  To establish a lab to handle pathogenic microorganisms, one must obtain an approval or complete a filing process. Where such an activity involves foreign investment, the competent authorities will carry out a “national security review”. 
  
  The Draft Law also provides for various specific safety management measures relating to, for example, laboratory animals, the treatment of waste and labs’ security systems and so on.
  
  

• Human genetic resources and biological resources
  
  The Draft Law has consolidated, and further enhanced, the existing requirements on human genetic resources and biological resources by:

1. on the one hand, requiring the competent authorities to investigate and establish registration requirements for human genetic resources and biological resources; and
2. on the other, requiring the individuals and entities engaging in the collection, preservation, use and provision of such resources to comply with the relevant regulatory measures, including ethical rules and requirements on approval, reporting and benefit sharing. 

Among other things, the Draft Law provides various specific requirements for “foreign organisations and individuals as well as the institutions formed or actually controlled by such foreign organisations and/or individuals” (collectively the “Foreign Organisations”). Foreign Organisations are prevented from collecting and preserving China’s human genetic resources in China and from providing China’s human genetic resources outside China. They are also subject to various regulatory requirements, depending on their activities. For example, where China’s human genetic resources are to be provided to or used by a Foreign Organisation, a report must be submitted to the competent authority in advance. If such activities could affect public health, the national security and the public interests, the authority must conduct a “national security review”.

• Prevention of bioterrorism and the defence against biological weapons threats
  
  As a general principle, the Draft Law prohibits any entity and individual from acquiring, storing, possessing and using any biological weapon by any means, and requires the competent authorities to issue lists of organisms, biotoxins, equipment or technologies that can be used for the purpose of bioterrorism or for the manufacture of biological weapons (the “Listed Items”). The Listed Items will be subject to specific regulatory measures, including investigation conducted by and preventive measures imposed by the competent authorities with respect to their entry and exit, import and export, acquisition, manufacture, transfer, release and so on.
  
  
• Biosafety capacity building
  
  As the first law in China providing for biosafety capacity building as a statutory responsibility of the Chinese government, the Draft Law requires the government to implement various measures accordingly, such as to increase investment in the construction of biosafety infrastructure, to further support biotechnology research and to increase material reserves in response to major new outbreaks of epidemics.

Penalties

The Draft Law triggers severe administrative penalties for non-compliance with it. For example, any company engaging in the RDA of biotechnology that may endanger national security may, among other things, face an administrative fine of up to RMB 10 million (appx. USD 1.4 million). If the illegal gains amount to more than RMB 1 million, the administrative fine could be up to 10 times the illegal gains. Furthermore, their legal representative and other specified persons (such as the person in direct charge) may be prohibited from engaging in the relevant business for 10 years.

Where a violation constitutes a crime, criminal sanctions will follow.

Implications and Going Forward

For the first time in China, the Draft Law legally defines the scope and framework of biological safety and provides the fundamental requirements under each angle of this framework. Companies operating in and outside China need to carefully assess their activities and the products and technologies they deal with, and comply with the applicable regulatory requirements provided by this Law, including reporting, approval, registration, filing, ethical requirements and a “national security review”. While many of these requirements would apply to companies engaging in a specific activity, certain requirements apply to any entity or individual, such as certain prohibitions and the reporting of infectious diseases or animal or plant epidemics. Non-compliance with this law will trigger severe penalties as mentioned above.

The concrete timelines for the promulgation of this Law remain unclear. Various implementing rules are expected to be promulgated to further clarify the law’s requirements. Such implementing rules could be the updated versions of various exiting Chinese regulations. 

With this Law confirming that “biological safety constitutes an important part of the national security”, it will also be important to look out for the possible interplay between this law and other existing and evolving legal systems of China that also feature the national security elements, such as those related to foreign investment, cybersecurity and export controls.